✈️ I Sold My Business (And It Sucked).

Jetsetters! It’s great to be back in the pilot’s seat.

It’s been a while, hasn’t it? I almost forgot how to write (no joke). Today’s newsletter is a special one for many reasons. I sold my first business (it sucked). And had a baby (it was awesome). All within the last 30 days.

In today’s newsletter, I’ll cover how I sold my first business and what I’m doing next. Buckle up. This will be a fun ride!

But first, before we begin… a quick word from our sponsor.

The Decision

I sold my first business. And became a first-time father. All in the blink of an eye. Well, almost. Technically, it was within 30 days. But still, who can say they sold a business and had a baby within 30 days? Not many, I can promise you that. (Obligatory cute baby photo at the end of the post.)

And that business that I sold? It was cash-flowing… negative.

That’s right. I sold a cash-flow negative business. Whaaaaat?

It’s not what I had originally planned.

Gather around and grab your popcorn, Jetsetters. It’s about to get good…

July 17th, 2023. We find out that my wife is pregnant.

My immediate thought? I need to prune my Personal HoldCo. I had too much on my plate. I wasn’t ready.

On that day, I decided to sell my e-commerce business, Urban EDC.

It was my most “sellable” business asset:

• Cash-flow positive

• Capable team in place

• Highest potential EBITDA multiple

In my past posts, I’ve talked about how I work “4 hours per week, making $300,000 per month in revenue.”

This was Urban EDC. Great team. Healthy revenue. Growing year over year.

Here are the revenue numbers:

• 2016: $412,069

• 2017: $966,725

• 2018: $1,110,298

• 2019: $1,774,240

• 2020: $2,076,480

• 2021: $2,394,022

• 2022: $3,411,402

Trailing 12-month revenue? $3,336,833 with EBITDA of $600k.

I mean, it doesn’t take a rocket scientist to do the math here. Not quite hockey-stick curve growth, but still, not too shabby… as a solo bootstrapped founder.

I partnered up with an M&A advisor. By late October, Urban EDC was up for sale. Our go-to-market strategy was simple: target strategics first, then open up to the broad market after.

After some enthusiasm at the start, November rolls around… nothing.

Now, we’ve officially entered turkey & football week… nothing.

Now, it’s Santas, eggnogs, and cookies… nothing.

While this is all happening, there’s a fire. Not a literal fire. But for me, it might have been worse than a real fire. My 3PL (third-party logistics) company GrowthJet, one of my portfolio companies in my Personal HoldCo, was struggling.

There’s a dispute in my lease agreement and my landlord is demanding that I pay an extra 35% in rent starting in November.

I hire an attorney. He’s almost certain that we’ll win. But, there was one small, teeny-little problem. My landlord also provides all the labor for my 3PL business. It’s a strange arrangement, but it worked out quiet well… until it didn’t.

On Black Friday Cyber Monday weekend, my landlord pulled his entire labor staff in protest. I was holding out on the 35% increase in rent. So he pulled the only lever he had… his labor force.

Imagine. Our busiest day of the year. No one working. I said earlier that a fire would might have been easier to handle. I wasn’t kidding.

I went in to fulfill as many orders as I could, while frantically trying to hire more staff. Of course, it's the worst time to hire. Because none of them are experienced. They had no idea what they were doing. I avoided contact with my landlord who also happened to be sharing the space with us. It was complete chaos. Everything that could go wrong, did.

My attorney told me to pay the full amount of rent “in distress” which is fancy way to say that I wouldn’t set a new precedent legally by paying the full amount.

So, I paid the whole damn thing. 100% of the rent for December. Actually, more like… 135% of the rent? You get the idea.

Follow the Bread Crumbs

I’ll never forget… at the peak of this craziness, my General Manager for GrowthJet pulled me aside and asked me if I ever considered selling GrowthJet. I never thought about it because we were still cash-flowing negative. My plan was to reinvest the sale proceeds from Urban EDC to grow GrowthJet into a positive cash-flowing company.

But, now… my General Manager is telling me, I can sell this thing off? No way, Jose.

Surprise! He had spoken to the landlord and apparently, my landlord was interested in buying GrowthJet. Wait. Did I hear that right? My landlord wants to buy this negative cashflow business? “What in the world…”

I was shocked. Why would he want to buy this business?

I set up a meeting to meet with the Founder & President of the organization, aka Labor Supplier, aka Mr. Landlord himself.

Surprisingly, the talks went smoothly. Perhaps, too smoothly (I should have known). He agreed to purchase the business outright because he wanted to own a business he could run himself using his labor force.

After several meetings, all parties verbally agreed on the sale. I couldn’t believe it. I had done it. I had sold my first business. Just like that.

But then, a week later, they pulled the original deal. I was furious.

They structured an alternative deal that was so unfavorable, that it pissed me off. Essentially, they were getting the business for free. AND they could walk away from the deal after 90 days if they didn’t feel like it. Like a “try-before-you-buy” sorta thing. Worst part? They tried to jam this deal down my throat.

They brought in their attorney and while they knew I was represented by another attorney, they sat me down and said they wouldn’t let me leave the room until I signed paperwork. It felt like I was in an interrogation room at the police station being grilled to admit to something I never did. Only this time, I was being grilled to sign paperwork for something I never agreed to.

Of course, I refused to sign the paperwork. After several hours of them yelling at me, I was tired as hell, but I had half a brain to know this was a tactic (unethical practice) to break me down psychologically. What assholes.

By this point, I had decided I wasn’t going to sell GrowthJet to these clowns. They were unpredictable, unreasonable, and guaranteed to run this business to the ground.

That’s not the type of people I wanted handing off a business I’ve worked so hard to build for the past 4 years.

So, what did I do? I found new buyers. By myself.

I don’t recommend self-brokering a deal like I did. It will eat you alive.

But, here I am telling you this story. So I survived, didn’t I?

Before I tell you how… a quick word from my own business, Urban EDC (hint, hint).

So, before we get into how I self-brokered this deal, let’s address the elephant in the room:

Why didn’t I use the same M&A advisor as the ones I hired for Urban EDC?

Well… a few reasons:

1. It would have delayed the deal

2. Deal size was too small for them

3. I wanted them to focus on Urban EDC

So, what did I do?

Love Affair Gone Wrong

I recalled an email I received earlier that year. It almost felt like a spam mail back then. A random M&A advisor was cold pitching 3PLs to see if we’d be open to selling. At the time, I had no interest in selling GrowthJet because I didn’t think it had any value.

So, I dug into my inbox and pulled out this piece of crumpled up digital paper. Before you know it, I was on a phone call. He had 3-4 other 3PLs interested in buying GrowthJet.

This goes without saying… but your valuation is 95% determined by how others perceive you’re worth.

Negative cash flow? Didn’t matter. I had multiple potential buyers and that kept pushing the stakes higher. I was in the driver’s seat.

Each strategic buyer brought something different to the table.

One buyer wanted our client list. But they wanted us to terminate the lease and move everything over to their warehouse. (Yeah, about that lease…)

Another buyer wanted the business but they were still using software so archaic that it felt like we traveled back into the 70s. Our clients had to relearn everything.

Finally, we found a buyer who would take over our lease and move into our warehouse. They also used the same software we were already using so the handoff would be seamless. And they had great reviews from other clients. We had finally found our dance partner. Let’s roll.

This process was like dating. We talked about our values over fancy meals. We imagined our future together. Our goals, hopes, dreams.

But, little did I know… this was all a trap. All that courting upfront was only for show. Before I knew it, I was negotiating the first deal of my life. Each line item in the Purchase Agreement was scrutinized by big-time attorneys.

Because I was self-brokering this deal, they didn’t play nice. They wanted to chew me up and spit me back out.

Negotiation was painful. Psychological warfare. Sometimes physical.

In fact, amidst negotiations, my landlord somehow came right up to my face and spit into my face with 3 of his staff members surrounding me. No rhyme or reason. I wasn’t even negotiating with him anymore. I was shocked. I wondered if the buyer sent them in to mess with me.

I recorded the whole thing and headed straight to the local police station to file a police report. You never know when it might come in handy.

But ultimately, both sides wanted the deal done. They wanted us. I wanted out.

So, in the end… the deal was made. Deal structure was quite complicated so I won’t dive into the details.

If you like fancy press releases, here you go.

So, What’s Next?

So, what happened to Urban EDC?

Well, if you can guess by now… we had no interested buyers. Can you believe it?

So let me get this straight… a business that’s cash-flow negative sells with multiple potential buyers… but a business with $600k EBITDA with $3m+ in revenue doesn’t sell?

Ironically, it’s the business asset that I am confident that I can grow to $10m+ in a few years.

But to be honest, by the end… I was exhausted. I had a baby on the way. I thought about shutting down Urban EDC. Screw it.

Maybe my fatherly instincts were kicking in. Who knows.

But at the end of the day, I decided to keep Urban EDC… for now.

So, I’m going to step in as operator and focus entirely on growing this thing to what it can be.

Lucky for you, I’m sharing everything publicly via this newsletter.

This means a few things for First Class Founders:

1. More written content (like this)

2. Less podcasts

Don’t worry. I will NOT make this an e-commerce growth newsletter. Instead, it will focus on broader business philosophy, core concepts, tactical strategies. You know, the good stuff.

Okay, now… ladies and gentleman, allow me to introduce you to Logan!

Here’s Logan Alexander Chung on his first day on Planet Earth.

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